Industry Update
Opinion Article25 January 2021

Consumer Behavior Changes During the Pandemic: What Should Businesses Know?

By Hassan Sameer Al Sayegh, M.B.A. Student (HFTP) Scholar

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Al Sayegh

It has been one year since the first COVID-19 case was reported to the World Health Organization in December 2019. The World Health Organization declared it a pandemic in March 2020. Multiple countries during the pandemic have initiated nationwide lockdowns and restrictions (WHO, 2020). The pandemic has led to global economic disruptions described by the IMF as the worst since the Great Depression (Jones et al., 2020).

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COVID-19 is having a lasting impact on consumer needs and preferences (Samuel, 2020). It is being declared as "the new normal" (Charm et al., 2020). Interestingly, consumers are adjusting to this new normal, with significant changes noted in their behaviors.

Shift to essentials

A noticeable change in the behaviors of consumers during the pandemic is their shift to essential buying (i.e. groceries) and a reduction in the purchase of discretionary items (i.e. non-essential products and services) (Charm et al., 2020). Value-based purchasing is the key trend during the pandemic; consumers are looking for "value for money" now more than ever. Saving is the top priority of people with disposable income (KPMG, 2020). Consumers are becoming more conscious of their purchases and are striving to limit excess spending and wastages (Wright and Blackburn, 2020). This change has arisen because customers feel financially pressured and vulnerable due to COVID-19 (KPMG, 2020).

Shift to digital platforms across all spheres of life

The pandemic has led to social distancing and reduced in-person interactions, which has resulted in a specific preference for digital usage. Fortunately, digital channels have filled the gaps in the spheres of life (KPMG, 2020). People are working, purchasing, learning and playing, all remotely (Kohli et al., 2020). COVID-19 has accelerated the shift to digital platforms expeditiously. Interestingly, digital usage is now not linked to a certain age; instead, it has become mainstream across all age groups and generations (Puttaiah et al., 2020). There has been an unprecedented surge in e-commerce in today's markets; for example, Amazon e-commerce sales increased by 47 percent YTD for the second quarter of 2020 (Hernandez, 2020).

Loss of loyalty

Consumers have opted to experience new brands and are adopting new shopping behaviors due to the disruption in their regular purchasing patterns. Interestingly, if this change has satisfied consumers, there is a greater chance that it will stay (Puttaiah et al., 2020). Value is a fundamental reason for customers to experience new brands and places to shop. Other reasons for trying new brands are availability, convenience and quality (Charm et al., 2020).

Moreover, consumers overall trust in brands has decreased (KPMG, 2020). Interestingly, there has been an increase in the love for local brands. A motive to shop local is reflected in consumers' purchases and the way they shop (Wright and Blackburn, 2020).

Nesting at home

New habits are forming as consumers are staying at home. Home is now the school, coffee shop, entertainment and restaurant center for consumers (Kohli et al., 2020). The fine line between work and personal life is blurred and merging together, as many consumers are working from home and also plan to continue to do so in the future. This is challenging the businesses that rely on customers' physical presence to gain revenue, such as the hospitality and tourism industry (KPMG, 2020).

Impact on hospitality and tourism

The tourism industry is healing as restrictions are removed in some countries and people adjust to the new normal. However, tourists' behavior is affected by psychological and economic factors. Psychological factors include the fear of contracting the virus and the willingness to travel. The economic factor is the decrease in household income. Both affect the decision-making process of tourists (Santos et al., 2020).

According to the World Tourism Barometer, international travelers decreased by 65 percent, which means the industry lost 440 million in international travelers. Interestingly, consumers are opting for domestic tourism in some countries (UNWTO, 2020). Domestic tourism is the act of traveling for leisure or business within one's country of residence. The hospitality industry is surviving on these "staycations" (KPMG, 2020). The UNWTO expects domestic tourism to heal the industry faster and stronger than international travel (UNWTO, 2020). For example, the tourism industry in the Emirate of Dubai in the United Arab Emirates has seen an increase in domestic tourism by 107 percent. The increase has made up more than three-quarters of hotel bookings to date (Corder, 2020).

Action points

The hospitality industry's stakeholders in the middle east region should know their customers and their situation. Behavioral changes in consumers should be continuously studied to avoid losing market share. Stakeholders should change according to market demands or otherwise run the risk of going bankrupt. Due to the loss of loyalty, businesses should ensure first-class customer service management and build trust through communication.

"Communication and change is key to surviving the impact of COVID-19."

The hotel experience should be reinvented to provide a hassle-free experience and a hygienic environment. For the time being, the industry should push for domestic tourism to survive the impact of COVID-19. Innovative solutions such as extending the use of day rooms and offering discounts to residents of the country is a must.

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Hassan Sameer Al Sayegh

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